Oshatz v. Goltz, A7902-00642

• Citation: 55 Or.App. 173,637 P.2d 628
• Decision Date: 14 December 1981
• Docket Number: No. A7902-00642,A7902-00642
• Parties: Robert OSHATZ, Appellant, v. Dennis GOLTZ and Irene Goltz, Respondents. ; CA 18044.
• Court: Court of Appeals of Oregon

Page 628

637 P.2d 628

55 Or.App. 173

Robert OSHATZ, Appellant, v. Dennis GOLTZ and Irene Goltz, Respondents.

No. A7902-00642; CA 18044.

Court of Appeals of Oregon.

Argued and Submitted April 27, 1981.

Decided Dec. 14, 1981.

Gary M. Bullock, Portland, argued the cause and filed the brief for appellant.

Gary I. Grenley, Portland, argued the cause for respondent. With him on the brief was Grenley, Rotenberg & Laskowski, Portland.

Before BUTTLER, P. J., and WARDEN and WARREN, JJ.

WARDEN, Judge.

Plaintiff brought a suit in equity, seeking dissolution of an alleged oral partnership between himself and defendant Dennis Goltz (defendant), ¹ an accounting, appointment of a receiver, equal division of profits and losses and general equitable relief. He appeals from the trial court's findings that there was no partnership and that he was not entitled to recover the reasonable value of his architectural services because he failed to plead the issue.

Plaintiff is an architect, and defendant is a veterinarian. In 1972, plaintiff provided architectural services for defendant in the construction of a veterinary hospital. In May, 1977, they associated in the acquisition of certain real property and the construction of a commercial building. No written agreement setting out their business relationship was executed, however, and the parties disagree as to the character of that relationship. Plaintiff contends that from the beginning they agreed to be partners. He testified that the agreement was not put in writing, initially because he did not want developers and other clients for his architectural services to know that he was involved in the ownership of a development project and, later, because defendant insisted upon settling unrelated legal matters in which he was involved before having their agreement put in writing. Defendant, on the other hand, contends that the parties never agreed upon what form their business association would take or upon its terms. He concedes that formation of a partnership was under consideration from the outset, but it was never formalized, orally or in writing, because there were too many areas of disagreement, including the relative values of the services each was to contribute to the partnership.

Although we review de novo, ORS 19.125(3), we give particular weight to those trial court findings which turn on a witness' credibility. State ex rel. Juv. Dept. v. Maves, 33 Or.App. 411, 416, 576 P.2d 826 (1978).

"A partnership is an association of two or more persons to carry on as coowners of a business for profit." (Emphasis added.) ORS 68.110(1). A mere community of interest, such as the right to share in profits as compensation for services rendered, does not make one a partner; the right to share in profits must result from part ownership of the business. Hayes v. Killinger, 235 Or. 465, 385 P.2d 747 (1963). The plaintiff must prove, among other things, that the parties mutually intended to enter into such a relationship. Burnett v. Lemon, 185 Or. 54, 199 P.2d 910 (1948). Where the alleged agreement was oral, the court must look primarily to the parties' conduct and course of dealing to determine whether a partnership was formed. Hayes v. Killinger, supra. Self-serving declarations of a party are not sufficient. Burnett v. Lemon, supra.

Factors that weigh against the existence of a partnership here include:

(1) Plaintiff made a number of appearances before the Beaverton Board of Design Review in behalf of the project in which he identified himself only as the architect, while identifying defendant as the owner.

(2) Defendant alone was a party to the agreement with the general contractor for the construction of the building.

(3) Defendant alone negotiated and signed the lease with Chicago Title Insurance Company, which was to be a tenant in the completed building. He alone negotiated and signed the construction contract for leasehold improvements and paid 47 percent of the cost of the improvement's construction. Plaintiff never indicated to Chicago Title that he had a financial or partnership interest in the building. When changes had to be made during construction, plaintiff said that he had to contact the owner of the building.

(4) Defendants were sole applicants for and obligors on the building construction loan, and all bank documents indicate that they were sole owners of the building.

(5) A certified public accountant, with whom the parties met on May 27, 1977, to discuss this venture and the nature of their business relationship, testified that the parties could not agree on the terms of the potential partnership and that plaintiff indicated an inability or unwillingness to make an equal financial contribution or to sign the loan obligation.

(6) A lawyer with whom the parties met, on July 26, 1977, to discuss their business relationship testified that agreement had not been reached on the terms of a partnership at that time and that the discussion was exploratory.

(7) Plaintiff paid nothing towards the option on the real property or on the property itself; he paid no part of the financing fee; he made no payments on the construction loan; he paid no part of the building permit fee; and he paid none of the $17,000 leasing commission.

(8) Although plaintiff testified that, in the course of arriving at a property settlement agreement in a suit to dissolve their marriage, he informed his then wife of his partnership interest, she testified that she was not so informed. He also testified that he informed the attorney representing him in the dissolution suit that "he had a business partnership with Dennis Goltz." The attorney, referring to his notes, testified that he was told only that there was a potential joint venture, which plaintiff had not yet bought into.

These are the facts that suggest a partnership:

(1) Plaintiff performed extensive architectural services without any payment from defendant and bore the risk of losing his fee.

(2) Plaintiff paid out $5,305.56 in direct costs on the project.

(3) Plaintiff performed other services beyond what an architect would ordinarily do, including negotiating and paying for a required easement, soliciting neighbors' consents to a variance and appearing before the city council and obtaining the needed variance.

We agree with the trial court that the weight of the evidence as to the parties' conduct is against plaintiff. Apart from the facts recited above, plaintiff's evidence consists primarily of his own testimony as to what he and defendant agreed upon, and that is not enough to prove the existence of a partnership. Burnett v. Lemon, supra. Moreover, to whatever extent we may properly consider the parties' own assertions, such testimony also weighs in defendant's favor, first, because defendant testified that there was no partnership (and we defer to the trial court on questions of witness credibility); and, second, because the substance of plaintiff's testimony, which we have examined for ourselves, diminishes his credibility as well. His explanation for not putting the alleged agreement in writing at the outset is not satisfactory: a written agreement no more needs be made public than an oral one. Although plaintiff's desire to conceal his interest in the building may explain his public statements in which he identified defendant as the owner and himself as merely the architect, we think those statements must be held against him, either as to his credibility or on the partnership issue itself.

In sum, we agree with the trial court that plaintiff failed to carry his burden of proof that both parties intended to form a partnership and that they were co-owners of the property.

Although finding against plaintiff on his partnership theory, the trial court, nevertheless, initially found that he was entitled to $27,705.50 as compensation for his architectural services and for unpaid costs. Defendant objected on the grounds that that award went beyond the issues framed by the pleadings and that the trial court lacked jurisdiction to award such compensation. The trial court recognized that defendant had been disadvantaged by a lack of opportunity to present his own evidence on what would be reasonable compensation ² and for that reason amended its findings and conclusions to delete the award.

It is well established that,

" * * * a 'court of equity, having jurisdiction of the subject matter of a suit * * * will proceed to decide the whole issue and award complete relief, although the rights of the parties are strictly legal and the final remedy is of a kind that may be granted by a court of law. * * * ' Ruby v. West Coast Lumber Co., 139 Or. 388, 393, 10 P.2d 358 (1932)." Emrich v. Emery, 216 Or. 88, 95, 332 P.2d 1045 (1958), 335 P.2d 604, 337 P.2d 972 (1959).

It is also well established, however, that the relief which a court of equity may grant must be confined to issues fairly raised by the pleadings. Caughanour v. Hutchinson, 41 Or. 419, 424, 69 P. 68 (1902); Hurlbutt v. Hurlbutt, 36 Or.App. 721, 585 P.2d 724 (1978), rev. den. 285 Or. 73 (1979); but compare, Ellison v. Watson, 53 Or.App. 923, 633 P.2d 840 (1981), with Shumate v. Robinson, 52 Or.App. 199, 627 P.2d 1295 (1981).

The question here is whether the pleadings fairly raised the issue of recovery of reasonable value for plaintiff's services. We think they did. The complaint alleged that plaintiff contributed cash and architectural services towards the construction of the building which defendant owns. It included a prayer for an accounting and for general equitable relief. Defendant's answer admitted that plaintiff rendered architectural and general contracting services to defendant.

In Emrich, the plaintiff brought a suit to foreclose a mortgage on certain property, and the defendants filed a cross-complaint seeking to transform a deed into a mortgage, an accounting, and general equitable relief with respect to a building which the defendants had...